%1

Less than five years ago, a $430 million merger with Provide Commerce Inc. was supposed to make aging flower-delivery service FTD Cos. a contender online, capturing the technology that had made Provide’s ProFlowers a competitive threat. On Monday, FTD filed for bankruptcy, swamped in more than $200 million in debt and blaming the badly executed combination of its business and ProFlowers for its financial troubles, WSJ Pro Bankruptcy reported. FTD plans to sell off its businesses while in bankruptcy. FTD also planned to use tax breaks generated by its business losses to pay off debt, but a stock sale by shareholder Qurate Retail Inc. on the Friday before the bankruptcy filing has potentially thrown a wrench in that plan. Qurate, formerly known as Liberty Interactive Corp., is controlled by cable tycoon John Malone and is the company that sold Provide, including the ProFlowers business, to FTD. On Friday, it sold its 36.8% stake in FTD in off-market deals for $3 — not $3 a share, but $3 total — in a move meant to lock in losses on its investment, according to a filing with the Securities and Exchange Commission.

FTD Cos. won interim court orders that will allow it to continue operating under bankruptcy protection, but the flower-delivery company faces a battle with large shareholder Nantahala Capital Management over stock trades last week by John Malone’s Liberty Interactive LLC, the WSJ Pro Bankruptcy reported. Near the end of a hearing yesterday in the U.S. Bankruptcy Court in Wilmington, Del., Nantahala lawyer Arthur Steinberg challenged FTD over its attempt to put limits on how much of its stock can change hands. FTD filed for chapter 11 protection on Monday and was in court with a relatively routine agenda, seeking permission to pay suppliers and keep cash flowing to the network of independent florists that make up the backbone of its business. But that was before Steinberg pointed out during the hearing that Liberty had sold off its 36.8 percent stake in FTD to three other investment firms days before FTD filed for bankruptcy. Liberty reported a trio of stock sales agreements in a Securities and Exchange Commission filing. The sales were set to close on Friday, according to the sales contracts.

Retailers’ earnings season has gone from bad to worse, according to a Wall Street Journal commentary. The bleeding intensified last week, with shares of Abercrombie & Fitch plummeting 26 percent on Wednesday, the biggest percentage decline since the company went public. PVH Corp., owner of brands including Van Heusen, Tommy Hilfilger, and Calvin Klein, dropped 10 percent that day, too. On Thursday, women’s wear chain J.Jill was down 53 percent and on Friday, Gap Inc. slid 9 percent. It is hard to miss what all of these retailers have in common: They are mall-based. While retailers posted generally strong numbers in 2018, raising hopes of a retail renaissance, this year has seen a reversion to the pre-2018 trend: department stores and mall-based retailers giving up share to discount stores and e-commerce, according to the commentary. The perceived renaissance now seems to have been largely a function of lean inventories, not an actual increase in demand. Now inventory is high again, and retailers are resorting to promotions, according to the commentary.

Fast-fashion chain Forever 21 Inc. is in talks with potential lenders and restructuring advisers as it explores options for turning around its ailing business, Bloomberg News reported. The company is exploring financing that would shore up its liquidity and ensure founder Do Won Chang maintains control, said the people, who asked not to be identified because they’re not authorized to speak publicly. It’s also spoken with Apollo Global Management about lining up potential debtor-in-possession financing if it were to seek bankruptcy. The Los Angeles-based chain has opened large-format stores and expanded into new markets at a time when competitors have pulled back. Forever 21 operates hundreds of stores in the U.S., Europe, Asia and Latin America, and its international operations in particular have been a drag on business. The family-owned company opened its first store in Los Angeles in 1984 as Fashion 21 and established itself as a destination for younger shoppers looking for trendy clothes at affordable prices. But competitors have crowded into that segment of retail, from H&M to Target to new online sellers. Regional mall operator Macerich Co. named Forever 21 as its second-largest tenant in its latest annual regulatory filing, accounting for 2.5 percent of its total rents as of Dec. 31.

The parent company of Sears and Kmart stores, controlled by former Sears Holdings Corp. Chief Executive Eddie Lampert, has agreed to buy the rest of Sears Hometown and Outlet Stores Inc.’s shares outstanding that Lampert’s hedge fund doesn’t already own, the Wall Street Journal reported. Transform Holdco LLC is buying the rest of Sears — or 42 percent of the company — for $2.25 a share in cash. The companies said that the deal brings Sears Hometown and Sears and Kmart stores back together after Sears Hometown stores were spun off from Sears Holdings Corp. seven years earlier. Transform’s majority owners are ESL Investments Inc., Lampert’s hedge fund, and its affiliates. A judge earlier this year approved a plan for Sears Holdings Corp., the former owner of Sears and Kmart stores that applied for bankruptcy last year, to sell assets to Lampert’s new company. Lampert was previously CEO of Sears Holdings.

A group of retired Sears Holdings Corp. workers have asked for the creation of a committee to protect their interests as a retiree died shortly after his life insurance was canceled, Bloomberg News reported. Lawyers for the retired workers say that the bankrupt retailer has wrongly terminated the life insurance policies for tens of thousands of former employees. They believe the spouses of some Sears retirees who recently died have been deprived of the life insurance payment earned from years of work at the iconic department store, according to a court filing. In one instance, the life insurance policy of a Sears retiree who died May 6 won’t be paid because his death was 21 days after the Sears estate terminated his benefits, according to the Tuesday court filing. Sears filed for bankruptcy last year and sold its assets in January. The shell of the business that is now winding down with a plan to pay creditors said in an April court filing that it had stopped making premium payments and had terminated the retiree plan. The U.S. Department of Labor objected earlier this month to the estate plan to end the life insurance without court approval, but the estate responded that it has the right to “unilaterally amend or terminate the plan at any time.”

Online furniture and appliance seller DirectBuy Home Improvement Inc., a subsidiary of e-commerce business CSC Generation, has won a bankruptcy auction for home-decor retailer Z Gallerie LLC with a bid valued at $20.3 million, the Wall Street Journal reported. DirectBuy’s bid comprises $7.7 million cash and $12.6 million in debt provided by KKR Credit Advisors and B. Riley Financial Inc , according to papers filed in the U.S. Bankruptcy Court in Wilmington, Del. CSC Generation, an e-commerce business founded by Justin Yoshimura, owns DirectBuy and several retail brands; CSC purchased the intellectual property of Bon-Ton Stores Inc. last year. The proposed transaction will be finalized through a chapter 11 plan which already has been filed with the bankruptcy court, said Joshua Sussberg, a Kirkland & Ellis LLP lawyer representing Z Gallerie. Judge Laurie Selber Silverstein is scheduled to consider Z Gallerie’s chapter 11 plan on June 11, court papers say.

The judge presiding over ShopKo’s bankruptcy declined to confirm the retailer’s liquidation strategy, objecting to broad offers of legal immunity to insiders that included officers and directors, WSJ Pro Bankruptcy reported. Bankruptcy Judge Thomas Saladino said that it was his toughest call ever on the confirmation of a chapter 11 plan. The proposal developed during the bankruptcy was eventually supported by most major creditors except for drug supplier McKesson Corp., which took issue with grants of legal immunity that ShopKo wanted to grant to company insiders. Secured creditors, including Wells Fargo NA, would have recouped virtually everything they were owed under the proposal, though unsecured creditors were expected to receive at most pennies on the dollar. ShopKo has closed most of the roughly 370 general-merchandise stores it brought with it into chapter 11, while most of its 14,000 employees lost their jobs.

When Eddie Lampert committed to buy out Sears from bankruptcy, he agreed to pay displaced workers up to $43 million. Now, he’s changing his mind, Fortune reported. Lampert has asked a federal bankruptcy judge to release him from that promise, saying Sears has failed to live up to its obligation to sell him most of its assets. The $43 million was earmarked for employees who lost their jobs during the hundreds of store closings from the time of the bankruptcy filing through the time Lampert’s ESL Investments (via a new subsidiary called Transform Holdco) bought the company holdings. Lampert says Sears has not fallen short on several fronts, including handing over ownership of its headquarters in Chicago and delaying payments to key vendors. Sears Holdings, meanwhile, has sued Lampert, saying that he stripped $2 billion in assets, which could have been used to pay creditors, from the company as it veered toward bankruptcy. Last October, Sears filed bankruptcy after 125 years in business. Lampert has repeatedly said he hoped to save the company, though some critics say the store’s demise was hastened by some of his actions as CEO, such as selling off its best brands, including Craftsman and Lands’ End.

What remains of Sears Holdings Corp. will finish its bankruptcy with a heap of unpaid bills, according to creditors who are ramping up for a court fight over the former retailer’s bankruptcy plan, WSJ Pro Bankruptcy reported. The retailer filed for bankruptcy protection last year, sold off parts of its business, and tried to scrape together cash to pay off hundreds of millions of dollars of debts. The old Sears left behind is pushing for court approval of a chapter 11 plan, but a group of creditors said in a court filing on Wednesday that there is not enough money to cover costs from the bankruptcy process itself. Suppliers, landlords and others owed money by Sears would be better off if the chapter 11 case was converted to a chapter 7 liquidation, with a trustee to take over for the 10 legal and professional firms that have been managing the company’s final affairs, the committee of unsecured creditors said. Read more. 

In related news, Sen. Elizabeth Warren (D-Mass.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) teamed up yesterday to blast Treasury Secretary Steven Mnuchin over the bankruptcy of Sears, Roll Call reported. Warren and Ocasio-Cortez are questioning Mnuchin’s actions as a member of the Sears board and his longstanding ties to Eddie Lampert, the Sears CEO who came into that role after the retailer was purchased by his hedge fund. “We are deeply concerned by the financial engineering and potentially illegal activity that took place at Sears Holding Corporation while you served on the company’s board. In addition, we are concerned that, as Treasury Secretary, you are in position to take actions that benefit Sears’ shareholders and owners at the expense of workers and taxpayers,” the lawmakers wrote in a letter released yesterday. Read more.